Interesting article on 724 Solutions.
724 Solutions on a Roll with Wireless Banking
by Keith C. Applegate
8:36:00 AM August 30, 2000 GMT
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The past six months have not been very kind to 724 Solutions [SVNX: Nasdaq]. After topping out at $240 per share on March 9, the company’s stock price finally found a floor at $28-1/4. Currently, the Internet infrastructure software developer for financial service providers has rebounded into the mid-$40 range. We have a price target of $50 over the next two to four weeks on what we believe is a premiere holding for investors looking to play on the “wireless web” theme.
Tuesday morning, Bank of America [BAC: NYSE] announced the launching of wireless financial services to customers in the US. 724 Solutions, and the company’s highly successful Financial Services Platform (FSP), is a leading beneficiary of the announcement as Bank of America has approximately 30m customers in the US.
We feel that 724 Solutions is positioned perfectly to be a beneficiary of banking transactions coming online in the future. We believe that 724 Solutions is the best pure play in this industry with significant relationships with major banks in North America.
724 Solutions lists the following as its primary customers:
Bank of America (30m US customers)
Citigroup (100m customers worldwide)
Bank of Montreal (Canadian bank with US subsidiary Harris Bank in Chicago)
Wells Fargo (San Francisco-based bank)
For the above-mentioned banks, the global market potential for 724 Solutions calls for 152m customers. Citigroup [C: NYSE] has announced that it plans to launch wireless banking this summer. Wells Fargo [WFC: NYSE], on the other hand, has not publicly stated when it plans to launch.
In July, 724 Solutions announced a smaller-than-expected loss of $0.32 per share in the second quarter vs. a forecast loss of $0.39 per share. Results were impressive given the fact that the company went public in late January. Higher licensing fee revenues were garnered from an increased customer base (including the four major bank listed above) as well as a meaningful increase in service revenue growth for its consulting, implementation, and maintenance services.
We expect the same type of growth from 724 Solutions in the coming quarters. The company will be able to weather most storms due to the fact that it is awash in cash. 724 Solutions ended the second quarter with more than $189m in cash on hand—the result of a successfully timed IPO. Keep an eye on 724 Solutions’ cash balance, as it is a way to judge the company’s health.
724 Solutions closed the day Tuesday up nearly $7 to $44-7/16 on relatively heavy volume. We think its stock price will rise in the short term, and our price target is $50 over the next two to four weeks.
Happy trading
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